Finance for Non-Financial Managers

They just don't get it, do they?

The February 1 Wall Street Journal (today's) carries a front page article ("When the Home Bank Closes") about the founder of a startup company that has no financing, has garnered huge potential orders for his products, but is inconvenienced by the bank pulling the home equity line he was using to finance his business because the value of his home had sunk. Awww shucks!!!

Despite all that we and others have written on this topic, it seems there are always aspiring entrepreneurs who don't get the message, or don't believe it. In this case he even got Big Media attention. I'm certainly not a fan of the big banks' methods of managing their businesses at customers' expense, but that's not what this is about. If the value of the bank's collateral goes down, they should be entitled to ask for more collateral, since their job is to lend the money and then get it back again. No, what this is about is a startup that is inadequately financed, not yet profitable or self-sustaining, going after a chunk of business that it cannot hope to support without a loan for which it has no collateral. That perennially bad idea that if we just sell enough stuff, everything else will take care of itself.

The reality is that it doesn't. Selling more than you can deliver simply causes a sequence of bad things to happen. the CEO is euphoric about the sale, then stresses about how to deliver, THEN looks for the source of capital, and typically guesses low on what it will take, when it will be needed, and how much profit will be earned when the deal is done. And finally, of course, the customer will have gone through such trauma to get their goods, or not get them, that they'll certainly not come back again.

Wouldn't it be simpler to just plan your growth rate and resource needs together? Or does that make it less exciting?

As always, I welcome your comments and feedback.

PS: The same paper carried another article today entitled: "How to finance your startup without home equity."

Bridging the liquidity gap - a small business dilemma

"...three out of four small businesses that applied to banks for credit in 2010 got none or only some of the amount they asked for; half were rejected outright." That quote comes from a study conducted by the New York Fed and published as part of a webcast sponsored by CFO Magazine and The Receivables Exchange, an asset-based financing company. CFO Magazine's research arm actually conducted a survey late last year to learn about what small business CFOs were doing to cope with the situation. In spite of the study's discouraging findings, 57% of CFOs surveyed said they still intended to go to their bank for additional financing.

The survey report is well worth reading, and if you can't find it online ask me for a pdf format electronic copy.

But the point is not to dwell on the obvious, other than to remind you that you're not alone in being unable to get growth capital from your bank. The point is this: It ain't gonna get better anytime soon, so get used to it and find another way! So how does a small or mid-sized business get the capital they need for growth or restructuring or even as an exit for the long-time owners? one axiom is still true: If you keep doing what you've always done, you're not likely to get a different result. The tools of capital raising are many and varied, and while some work only some of the time, e.g. borrowing from your bank, others will work when the more traditional methods don't.

So look for other options. Get yourself an independent advisor who is not employed by one source of capital and ask them to help you explore the options that are best for your business and your strategic and personal goals. Then when you know what you want, go after that source with the right preparation, the right story, and the right support team. You'd be surprised how different that will make you look compared to all those businesses that DIDN'T get the money they asked for.

As always, I welcome your comments and feedback.

Employment growth in small business - new data

Macroeconomic Advisors reported this morning that the US economy added 110,000 private sector jobs last month, a bit more than predicted. More importantly, they all came from small and mid-sized businesses. All of them. Some things don't change, and one of them is that small business produces most of the job growth in this country because small business does most of the growing. Now is the time. If your business isn't growing today, you're doing something wrong. Find out what it is and fix it.

Gene Siciliano announces new book project

Press Release

A compendium of 26 nationally known business experts. 

Los Angeles, September 16, 2011:  Gene Siciliano, CPA, CMC^® author, consultant, professional speaker and business coach, announced today his participation in a new book project, THE Book on Business from A to Z: The 260 Most Important Answers You Need to Know. Compiled and Edited by Daniel Feiman, MBA, CMC^® the book contains 26 chapters written by 26 of the best experts available on each of the key topics covered in the book.

Gene authored the chapter on cash flow in recognition of his belief that cash flow has become the measure of success or survival during the past few years, particularly for smaller companies that were unable to tap the few drops of credit that banks have been prepared to offer to their customers. Cash management including efficient deployment of cash and proper cash flow planning are often the difference that keeps a company alive and helps them get prepared for the endlessly delayed economic recovery. Gene said “I was delighted to be asked to write on this topic, because I think it’s perhaps the most important topic in the book.”

Daniel Feiman wrote on his website: This book is great especially for people who need a fast read with direct answers to specific business questions Excellent for either a new or existing business. This is for absolutely everyone in search of solid information on a range of business subjects. …

The range of subjects goes from Marketing to Branding to Valuation to Turnaround. If you want the answers to many common business problems and challenges, you will find them in this book.

While it is impossible to do full justice to every business subject in a single volume, what will surprise you is how much useful material the co-authors manage to provide in this one. Although the format is standardized, the individual co-author’s style remains to engage the reader on the essential points in each chapter. 

The book is available on a pre-publication order basis from Amazon.com, Apple’s iTunes, BuildItBackwards.com or a bookstore near you.

Sunny Robilotta - Nonprofit CFO of the Year!

"In a packed Millennium Biltmore Hotel grand ballroom in Los Angeles today, and with a very competitive field of CFO Finalists (40 in total), Sunny Robilotta, CFO of Exceptional Children's Foundation, was named the 2012 Nonprofit CFO of the Year by the Los Angeles Business Journal's panel of judges. The award, in a highly competitive category in a town with literally thousands of nonprofit organizations, places Sunny among the City's elite financial leaders, a place she has occupied for years among all of us who work with and know her."

This announcement was made today by Dr. Scott Bowling, CEO of Exceptional Children's Foundation, a wonderful service organization on whose board I have served for over a dozen years. I was there as the award was announced, and to share this honor with Sunny and ECF.

Great work does bring its rewards. I thought you'd like to know.

Amazon.com best seller: #31 in Corporate Finance

My long-standing best selling book, "Finance for NonFinancial Managers," hit #31 on Amazon's list of best selling Corporate Finance books recently, an indication of how high quality content is truly ageless  even in today's world of rapidly growing information via the Internet.

Available in hard copy or eBook from Amazon, or in hard copy signed by the author at www.GeneSiciliano.com. If you don't have one you might ask yourself "Why not?"

As always I welcome your comments and feedback.

 

Cyber Security to Avoid Having Your Car Stolen

Another scary cybercrime news item from Dr. Stan Stahl (stan@citadel-information.com ), who reports these events to give us reason to be cautious, especially if you drive a late model car. He says:

Theft via text: Cars vulnerable to hack attacks: Texting and driving don't go well together - though not in the way you might think. Computer hackers can force some cars to unlock their doors and start their engines without a key by sending specially crafted messages to a car's anti-theft system. They can also snoop at where you've been by tapping the car's GPS system. Source: VolunteerTV, August 19, 2011

Want to hear that interview with Jim Blasingame on accounts receivable management? Twenty minutes or so in length, as Jim and I share views on a fundamental concept of business financial management. Here's the direct link - following some wonderful lead in music from the 60s:

http://www.google.com/url?sa=X&q=http://smallbusiness.forbes.com/small-business-interviews/gene-siciliano-10876/popup&ct=ga&cad=CAcQAhgAIAEoBDAAOABAlezh8QRIAVgAYgJlbg&cd=pQkUpB-zrsE&usg=AFQjCNEGmxdcLSzCtFcf6YUAKSvm6Un_ew

Cash management: Accounts Receivable metrics for sm(all) businesses

I'll be featured on Jim Blasingame's morning (Internet) radio show this coming Monday. Subject: "How Healthy Are Your Accounts Receivable?" The show airs at 8:30 ET, 5:30 PT, but can be heard later by going to the Small Business Advocate archives at http://www.smallbusinessadvocate.com/show .

Hackers Shift Attacks to Small Firms!

That's the headline in a Wall Street Journal article this past Thursday. The Journal went on to say:

"Hackers are expanding their sites beyond multinationals to include any business that stores data in electronic form. Small companies, which are making the leap to computerized systems and digital records, have now become hackers' main target....In 2010 (the government) responded to a combined 761 data breaches, up from 141 in 2009. Of those, 482 or 63% were at companies with 100 employees or fewer."

Local security experts have been raising the red flag for several years now, but the message is often poorly received because of the cost of beefed up digital security, often seen as unproductive overhead during a challenging economic recovery. It's like fire insurance -- the only thing more expensive than paying the premiums is the cost of a loss not covered by insurance.

This profit protection tip is brought to you by Your CFO for Rent.

As always, your comments and feedback are welcome.